Question

The following table shows the cost information for a product at the 15,000-units level. Use the table to answer these questions: What are the incremental and marginal costs for producing 5,000 additional units? Suppose that, at a new production level of 30,000, the fixed cost increases to $3 million, what are the incremental and marginal costs for the additional 10,000 units? All cost figures are in dollars. Calculate [USING EXCEL]

Quantity	Fixed Cost	Variable Cost	Total Cost	Incremental Coast	Marginal Cost
15,000	1,500,000	6,400,000	?
20,000	?	?	?	?	?
30,000	?	?	?	?	?

Answer 1

Marginal Cost is the increase/decrease in the cost resulted from producing an additional quantity of output.

Incremental Cost is the increase/decrease in the Overall Total cost for additional output. This is much wider than the definition of Marginal cost.

Based on the given data in two scenarios (Case 1 and Case 2):

The numbers represent Positive means increase in cost and negative means decrease in cost;

Incremental cost = Difference in the Total Cost;

Marginal Cost = Difference in the Total Cost per unit;